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This Week in Health Care Reform: May 31st, 2019

Drastic variation in diagnostic testing prices is found to lead to significant overspending in health care; elsewhere, physician revenues are shown to have jumped significantly in a few short years; national health care spending is projected to hit $3.6 trillion this year – with pharmaceutical spending expected to top $370 billion, alone.

Week in Review

Diagnostic Costs: A new study seeks to shine a light on the impact that wild price variations in diagnostic tests have had on driving up overall health care spending.  If nothing else, the results add to the mounting pile of evidence that these inconsistencies have only contributed to significant overspending and utilization in health care.  Released by UnitedHealth Group, the research found that in 2017 patients paid vastly different amounts from provider to provider – as much as 20-times more – for a set of common diagnostic tests, including MRIs, ultrasounds, and mammograms.  The analysis concludes that consumers could have saved $18.5 billion that year if the price variations in these tests had been reduced to prices already agreed to by many providers.

Physician Revenues: The average revenue generated by physicians for their hospitals has grown significantly in recent years.  According to survey responses by dozens of hospital CFOs, the combined net revenue – both, inpatient and outpatient – generated annually by a single physician for their health systems has increased 52 percent since the survey was last conducted in 2016, totaling $2.3 million.  In fact, the growth levels for specialty and primary care physicians were the highest ever observed in the survey.  Additional evidence shows a lack of disparity between outpatient specialists and hospital-employed physicians, suggesting that the transition to value-based care hasn’t interfered with specialists’ ability to generate revenue.  What this means, researchers go on to point out, is that our health care system still has a ways to go in fully integrating quality-based metrics into our larger care delivery model.  Such a system would prioritize prevention and proactive interventions, such as population health management, over more “invasive procedures and treatments” performed by specialists.

Health Care Spending: In the latest health care spending trend analysis released this week, overall national spending was projected to grow to $3.6 trillion in 2019.  That total represents a 4 percent increase from last year’s $3.5 trillion total spend.  That increase is largely attributed to Medicare’s preeminence as a leading payer for prescription drugs, with private health insurance not expected to be a significant contributor to spending growth.  While the forecast is lower than that released by the Centers for Medicare & Medicaid Services (CMS) earlier in the year, CMS actuaries anticipate spending to grow by an average of 5.7 percent beginning next year through 2027

Rx Spending:
Digging further into the above health care spending analysis, spending on pharmaceuticals is projected to grow by 2.5 percent this year to eclipse $370 billion.  With policymakers and regulators working to wrangle these out-of-control costs, forecasts predict that drug sales will account for nearly 10 percent of overall health expenditures by 2023, when pharmaceutical spending will reach more than $420 billionapproximately 1.7 percent of the national GDP.   

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